RNS No 7797x
LOPEX PLC
2 July 1999
PART 1
Incepta Group plc makes Offer for Lopex plc
valued at #47.9m
* Incepta today announces an Offer for Lopex plc valued
at #47.9 million
* Incepta's clear strategic focus, resources and
capabilities should enhance the performance of Lopex
* The combination of the two groups represents a natural
fit
* Combining the strengths of the two groups will extend
the resources, experience and expertise available to
meet clients' needs
* Terms of the Offer: 9 New Incepta Shares for every 4
Lopex Shares
* To minimise the period of uncertainty for employees and
clients of Lopex, the Offer is final. It will not be
increased or extended beyond the first closing date
(unless by that date, the Offer is unconditional as to
acceptances). However, Incepta reserves the right to
increase, extend or otherwise amend the Offer should a
competitive situation arise or as otherwise may be
permitted by the Code
* The Offer provides shareholders of Lopex with :
- the opportunity to become shareholders in one of the
fastest growing groups in the UK quoted media and
photography sector and to participate in the growth
potential of the Enlarged Group
- a premium of 29% to the Closing Price of 67p per
Lopex Share on 30 June 1999, the day before the substantial
increase in the share price of Lopex
- a premium of 68% over the Closing Price of 51.5p per Lopex
Share on 5 May 1999, the date of Lopex's most recent annual
general meeting
- a premium of 111% over the Closing Price of 41p per Lopex
Share on 14 December 1998, the date Incepta made its last purchase
of Lopex Shares to take its aggregate stake to 26.95 % of Lopex
- a premium of 11.1% to the Closing Price of 78p per Lopex
Share on 1 July 1999, being the last business day prior to this
announcement of the Offer and after the substantial increase in
the share price of Lopex on that day
* Incepta is seeking a recommendation of its Offer from the
Directors of Lopex
David Wright, the Chief Executive of Incepta Group plc said:
"The integration of the businesses of Incepta and Lopex will
create a larger and stronger organisation within their core
markets and enable the enlarged group to take advantage of the
opportunities arising from market consolidation. We believe the
acquisition represents a significant opportunity for both
businesses and will be value-enhancing for shareholders."
For further information contact:
Incepta Group plc
Telephone: 0171 638 9571
Andrew Cornelius
John Rudofsky
Beeson Gregory
Telephone: 0171 488 4040
Nick Rodgers
INCEPTA GROUP plc
Offer for Lopex
The board of Incepta Group plc ("Incepta") announces the terms of
a #35 million all share offer for the whole of the issued ordinary
share capital of Lopex ("Lopex") not already owned by Incepta
("Offer"). The Offer is to be made by Beeson Gregory Limited on
behalf of Incepta subject to the conditions set out in Appendix I,
and will be made on the following basis:
9 New Incepta Shares for every 4 Lopex Shares
and so in proportion for any other shares held in Lopex.
The Offer values each Lopex share at 86.6p (based on the Closing
Price of an Incepta share yesterday) and the whole of the issued
ordinary share capital of Lopex, being 55,258,370, ordinary shares
at approximately #47.9 million.
The board of Incepta yesterday approached representatives of
Lopex and their financial advisors with regard to the Offer.
However, in view of the substantial increase in the share price of
Lopex yesterday and the uncertainty and speculation it caused, the
board of Incepta has resolved to make full disclosure of the terms
and conditions of the Offer. The board of Incepta will continue
to seek the recommendation of Lopex's board and has offered to
meet with the board of Lopex on Monday 5 July 1999.
To minimise the period of uncertainty for employees and clients of
Lopex to no more than 21 days from the date of posting of the
formal offer document, the Offer will be a final offer which will
not be increased or extended (unless it is by then unconditional
as to acceptances). However, Incepta reserves the right to
increase, extend, or otherwise amend the Offer should a
competitive situation arise or as may otherwise be permitted by
the Code.
At the date of this announcement Incepta and its concert party,
Southwind Limited, own in aggregate 16,358,000 Lopex Shares,
representing 29.9 per cent. of Lopex's issued share capital.
The board of Incepta believes that the Offer is full and generous,
giving Lopex Shareholders:
* an opportunity to become shareholders in one of the fastest
growing groups in the UK quoted media and photography sector
and to participate in the growth potential of the Enlarged
Group;
* a premium of 29 per cent. to the Closing Price of 67p per Lopex
Share on 30 June 1999, the day prior to the substantial increase
in the share price of Lopex as mentioned above;
* a premium of 68 per cent. over the Closing Price of 51.5p per
Lopex Share on 5 May 1999, the date of Lopex's most recent
annual general meeting;
* a premium of 111 per cent. over the Closing Price of 41p per
Lopex Share on 14 December 1998, the date Incepta made its
last purchase of Lopex Shares to take its aggregate stake up
to 26.95 per cent. of Lopex; and
* a premium of 11.1 per cent. to the Closing Price of 78p per
Lopex Share on 1 July 1999, being the last business day prior
to this announcement of the Offer and after the substantial
increase in the share price of Lopex on that day.
Background to and reasons for the Offer
Against a background of consolidation in the marketing and
communications sector, it is becoming increasingly important that
groups operating in this sector possess the resource, experience
and expertise to provide strategic advice and execution to clients
at both a domestic and global level. Both Incepta and Lopex have
clearly articulated visions of building diversified marketing
communications groups capable of meeting the demands of corporate
clients worldwide.
The board of Incepta believes that Incepta and Lopex possess
complementary creative skills and resources and the combination of
the two groups represents a natural fit. The attractions of
combining Incepta and Lopex are set out below:
* the Board believes there is persuasive logic in combining the
strengths of the respective groups to extend the resource,
experience and expertise available to meet clients' needs;
* the Group's clear strategic focus, resources and capabilities
should enhance the performance of Lopex;
* the increased financial resources of the Enlarged Group will be
available to maximise investment for future organic growth of
the Enlarged Group;
* the commitment of the Incepta board to invest in Lopex's brands
and its staff;
* opportunities for cost savings relating to duplication at a head
office level;
* the integration of the businesses of Incepta and Lopex will
create a larger and stronger organisation within their core
markets and enable the Enlarged Group to take advantage of the
opportunities arising from market consolidation; and
* the Acquisition will increase the shareholder base of Incepta,
which is expected to lead to greater share marketability for
shareholders in the Enlarged Group.
A shared vision
Both groups share a common goal to utilise the
benefits of a diversified marketing and communications group.
"All our agencies continue to work closely together (and) a
series of successful client introductions were made between
agencies during the year . . . There are clear benefits in working
more closely as a group and enhancing our overall offer"
Peter Thomas, Chief Executive, Lopex, December 1998 Annual Report.
"The (Incepta) group is expanding upon the strength of its
international network .... this trend is a reflection of .... our
integrated global capabilities and importantly our ability to work
as a co-ordinated team throughout the world"
David Wright, Chief Executive, Incepta, February 1999 Annual Report.
Peter Thomas, Chief Executive of Lopex, recently highlighted the
three core aspects to Lopex's future strategic development as:
i) "Organically -- by building our current brands
ii) By acquisition -- either to add critical mass and expertise
to our existing brands or by buying sizeable profit
centres which broaden our overalloffer
iii) Internationally -- to capitalise on our core UK
strengths and to meet clients' increasing international
requirements, particularly in Europe, the USA and Asia."
Peter Thomas, Chief Executive, Lopex, December 1998 Annual Report
The Board believes that Incepta is capable of fulfilling each of
these needs by:
i) the commitment and financial strength to invest in Lopex's
portfolio of brands;
ii) the addition of Incepta's complementary businesses adding
critical mass and providing a stronger and broader services
offer; and
iii) providing access for Lopex's businesses, employees and
clients to Incepta's network of 34 offices worldwide,
promoting international growth.
People
The Incepta Group is built on the creativity and expertise
of our people. Throughout the Group's development the Board has
sought to foster a culture of extensive employee share ownership.
The Board believes this encourages a group ethic and allows each
individual to share in the success of the Group as it develops. In
aggregate, over 44 per cent. of Incepta's employees are either
shareholders or have an option to acquire, or have a conditional
interest in, the equity of the Company. The Board believes that
this philosophy of employee share ownership is a core strength of
the Incepta Group and one it shall seek to maintain and build on
within the Enlarged Group, allowing employees to share in its
future.
Lopex employees will benefit from joining the Enlarged Group for
the following reasons:
* they will be joining one of the fastest growing marketing and
communications groups in the UK quoted media and photography
sector;
* Incepta is committed to investing in Lopex's brands;
* the opportunity for employees to share in the future success
of the Enlarged Group through extensive employee share
ownership;
* Incepta is committed to creating greater professional
opportunities and appropriate investment in the development
of employees; and
* access to greater resources, expertise and new business
opportunities across the Enlarged Group.
Following the Offer becoming unconditional in all respects, it is
Incepta's intention to integrate the Lopex businesses into the
Incepta Group.
Incepta attaches great importance to the skills and experience of
the employees of Lopex and, accordingly, the rights of all
employees of Lopex will be fully safeguarded.
The Offer will be a share for share exchange. Set out below is
some of the background to Incepta and the reasons why the Board
believes Incepta Shares represent a very attractive investment.
Background to and information on Incepta
Incepta, originally incorporated in April 1986, was transformed through the
reversetakeover by Citigate in March 1997. The former management of
Citigate has since formed the majority of the executive Incepta
management team.
Incepta is an international marketing and communications group
comprising four divisions. These focus on advertising, public
relations, marketing communications and design and publishing. The
Group operates internationally through 34 offices worldwide,
headquartered in London. In addition, the Group retains an
international network of affiliates. Incepta currently acts for
over 1,200 clients worldwide, including over 50 per cent. of the
FTSE 100, 30 per cent. of the FTSE Eurotop 300 and over 20 per
cent. of the Global Fortune 500 companies. With over 950
employees, the Group benefits from a wide range of skills and
expertise and continues to develop its worldwide capabilities to
meet the international marketing and communications requirements
of large global organisations.
In the year ended 28 February 1999, Incepta achieved turnover of
#113.773 million (1998: #88.171 million) and an operating profit
before exceptional items of #8.113 million (1998: #5.761 million).
As at 28 February 1999, Incepta had net assets of #23.827 million
(1998: net liabilities of #1.619 million).
On 1 July 1999, the last business day prior to the announcement of
the Offer, the Closing Price of an Incepta Share was 38.5p, giving
Incepta a market capitalisation of #127.5 million.
Incepta's strategy
Incepta's strategic goal is the enhancement of shareholder value
through building a world class marketing and communications group,
capable of meeting the sophisticated demands of clients both
domestically and internationally. Our energies are directed at
sustaining our track record of earnings growth by continuing to
build upon our existing core presence in key markets around the
world.
Incepta's strategic approach has been to develop the Group through
a combination of organic growth and strategic acquisitions. Since
March 1997, Incepta has made thirteen acquisitions of various
sizes, to enhance the existing operations either by creating
greater critical mass in an established business or by extending
the global activity within a particular division.
An example is the #24 million acquisition of Dewe Rogerson in
October 1998. Incepta's current management has developed a
successful track record in integrating such acquisitions, and
accordingly, Citigate Dewe Rogerson (the re-branded global public
relations division) is now regarded as one of the leading
international financial public relations brands. The Group has
benefited from the combination of the two businesses with
significant account wins in their domestic markets and on a global
basis. Against this background, the Incepta board is confident
that similar benefits would be attained with the acquisition of
Lopex.
The Group continues to focus on the higher margin below-the-line
marketing disciplines, an emphasis shared by Lopex. In each
geographical location, Incepta is committed to offering excellence
in all of its core disciplines, enabling Incepta to deliver
integrated solutions to its clients.
Information on Lopex
Lopex is an integrated communications and marketing group,
providing its clients with the following services: public
relations and public affairs, marketing and communications
services, database and direct marketing, sector advertising and
marketing, mark research and consumer advertising.
In the year ended 31 December 1998, Lopex achieved turnover of
#129.186 million (1997: #116.514 million) and an operating profit
before exceptional expenses of #6.118 million (1997:#4.202
million).
As at 31 December 1998, Lopex had net assets of #9.448 million
(1997: #5.557 million).
On 1 July 1999, the last business day prior to the announcement of
the Offer, the Closing Price of a Lopex Share was 78p, giving
Lopex a market capitalisation of #42.6 million.
Performance of Incepta
Over the last seven years, Incepta's management has built an
international network of offices dedicated to the needs of its growing
international client base.
Incepta's current management has delivered substantial increases
in revenue over the last seven years, both as the private company
Citigate and following the reverse takeover of Incepta in March
1997.
Incepta's current management has also delivered strong earnings
growth and increases in shareholder value over the same period.
The Incepta Group's current operating margins of over 16 per cent.
compare very favourably with industry standards. Sound financial
controls have ensured that the growth in profitability has
translated into cash generation. The Directors believe that
gearing levels remain prudent with interest cover of over 10
times.
Performance of Lopex
Over the last six years, Lopex has delivered a less impressive
performance in terms of revenue growth, while the proportion of
turnover generated outside the UK and Ireland has fallen from 8.5
per cent. to 2.2 per cent. The number of employees has fallen by
over 20 per cent..
During this period, Lopex has had a mixed track record of
profitability. This has in part reflected the recognition of
exceptional losses in each of the last six years.
Tom Chandos (non-executive Chairman, Lopex plc) commented in the
1998 Annual Report that "the market for our services remains
competitive and there are, in some areas, signs of some softening
of demand". The consensus brokers' forecasts, as published in the
UK Estimates Directory over recent months has fallen by over 10
per cent. from a forecast pre-tax profit of #7.1 million (April
1999) to #6.3 million (June 1999).
Financial effects of accepting the Offer
The following tables set out, for illustrative purposes only, and
on the bases and assumptions set out in the notes below, the
financial effects of acceptance of the Offer on capital value and
net income for a Lopex Shareholder if the Offer becomes or is
declared wholly unconditional.
Notes Offer
(pence)
(a) Capital value
Market value of 9 New Incepta Shares (1) 346.5
Market value of 4 Lopex Shares (2) 268.0
Increase in capital value 78.5p
Representing an increase of 29.3%
(b) Net income
Net dividend income on 9 New Incepta Shares (3) 3.78
Net dividend income on 4 Lopex Shares (4) 6.00
Decrease in net income 2.2p
Representing a decrease of 37.0%
Notes:
(1) The market value of a New Incepta Share is based on the
Closing Price of 38.5p on 1 July 1999, being the last
business day prior to this announcement
(2) The market value of a Lopex Share is based on the Closing
Price of 67p on 30 June 1999, the day prior to the substantial
increase in the share price of Lopex as mentioned above
(3) The dividend income on a New Incepta Share is based on the
final dividend of 0.42p (net) per Incepta Share in respect of the
year ended 28 February 1999
(4) The dividend income on a Lopex Share is based on the final
and interim dividends of 1.50p (net) in aggregate per Lopex
Share in respect of the year ended 31 December 1998
General
The formal offer document, listing particulars and a circular to
holders of Incepta Shares setting out details of the Offer and
convening an Extraordinary General Meeting of Incepta to approve
the Offer will be despatched as soon as practicable. Shareholders
should read the whole of these documents and should not just rely
on the information in this announcement. Application will be made
to the London Stock Exchange for the New Incepta Shares to be
admitted to the Official List.
The Offer will not be made, directly or indirectly, in or into,
and copies of this announcement and any related offering documents
will not, and must not be, mailed or otherwise distributed
(including, without limitation, by way of fax, telex or telephone)
or sent in or into the United States, Canada, Australia or Japan
and the Offer will not be capable of acceptance by any such use,
means or facilities or from the United States, Canada, Australia
or Japan. Accordingly, copies of this announcement and related
offering documentation will not be and must not be, mailed or
otherwise distributed or sent into the United States, Canada,
Australia or Japan.
The New Incepta Shares to be issued pursuant to the Offer have not
been and will not be registered under the United States Securities
Act 1993 (as amended) nor under the securities laws of any
jurisdiction of the United States nor under any of the relevant
securities laws of Canada, Australia or Japan. Accordingly,
unless an exemption under the relevant securities laws of such
jurisdictions is available, the New Incepta Shares may not be
offered, sold or delivered, directly or indirectly, in the United
States, Canada, Australia or Japan.
Beeson Gregory, which is regulated in the UK by The Securities and
Futures Authority, is acting for Incepta in connection with the
Offer and no one else and will not be responsible to anyone other
than Incepta for providing the protections afforded to customers
of Incepta or for providing advice in relation to the Offer.
For further information contact:
Incepta Group plc
Telephone: 0171 638 9571
Andrew Cornelius
John Rudofsky
Beeson Gregory
Telephone: 0171 488 4040
Nick Rodgers
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